May 21, 2017

India doesn't have a lot to lose by boycotting OBOR

The following article originally appeared in the Economic Times on 21 May 2017. The full text can be found here.

What does India want from the world? It’s quite clear,
really: international partnerships to accelerate its domestic development, a
stable and conducive periphery, a multi-polar Asia, an end to cross-border
terrorism and a sufficient role in global governance to enable it to meet these
goals. Today, each of these objectives relates in some way to India’s relations
with China.

Until recently, India’s aspirations required it to forge
a complex and somewhat contradictory relationship with Beijing. From the early
2000s, India deepened trade and economic relations with its northern neighbour
and collaborated with China in creating space for rising powers on global
governance – including through the BRICS, the BASIC coalition on climate change
and the Asian Infrastructure Investment Bank.

At the same time, India took measures to address the
military imbalance along its disputed border with China, and kept a wary eye on
Beijing’s political and military relations in its neighbourhood, especially its
support for Pakistan (which extended to the transfer of nuclear and missile
technology).

But things have now changed, and faster than many
believed possible. The 2008 financial crisis, the half-heartedness of former US
president Barack Obama’s “pivot to Asia” and now Donald Trump’s “America First”
policy have accelerated China’s relative rise in the international system. And
that rise has been accompanied in China by stronger centralised governance,
enduring mercantilism, more assertive territorial revisionism with neighbours
and a continued disregard for certain international norms, including on cyber
security and freedom of navigation.

For India, China now factors everywhere. A balanced and
sustainable economic partnership is still necessary for India’s development. At
the same time, China plays a more active economic, political and military role
in India’s near abroad and Beijing provides cover for Pakistan’s continued
support for cross-border terrorism. Under President Xi Jinping, China projects
itself as ascendant, leaving little space either in Asia or on the world stage
for a rising India, whose transition into a middle-income country will take
place over the next two decades.

China’s ascendance is most evidently on display in its
plans for One Belt, One Road (OBOR) or the Belt & Road Initiative, the
subject of a major summit in Beijing this month. While many of its neighbours
sent heads of state or government, or ministerial delegations, India was
notably absent. India’s public rationale for its opposition to OBOR has long
been that the China Pakistan Economic Corridor (CPEC) ran through
Pakistan-Occupied Kashmir (PoK), and was thus a violation of Indian
sovereignty. But New Delhi’s concerns have long run deeper, and extended both
to CPEC and to the Maritime Silk Route.

India’s response to OBOR, by necessity, rests on a set of
assessments. Is OBOR a commercial project, with viable financing intended to
benefit both China and host countries? The evidence for this is weak. Sri Lanka
is but the starkest example. Chinese support to its former leader Mahinda
Rajapaksa led to the building of white elephant infrastructure projects
(including what has been described as “the most underused international airport
on the planet”), massive national debt and the translation of that debt into
political influence – which in turn had security implications. The gradual
development of Chinese military or “dual use” facilities in Djibouti and
Gwadar, and the creeping militarisation of the South China Sea, offer clear
indications of long-term Chinese intentions in the Indian Ocean region.

While India’s reservations about OBOR have been hinted at
for years, including by the prime minister, China’s public exhortations for
Indian participation at the May summit required a clearer articulation of
Indian concerns. This came in the form of a statement last week that stressed
India’s desire for greater regional connectivity, but laid out specific
criteria. Connectivity projects must be financially responsible and not create
an “unsustainable debt burden”. Additionally, they must reflect environmental
considerations, be based upon a “transparent assessment” of costs, and involve
the transfer of skills and technology to ensure their long-term maintenance by
local communities. And, of course, they must respect countries’ sovereignty and
territorial integrity. This is a clear set of normative standards, one that
China, recipients of OBOR-linked largesse and other actors — including in
Europe, Japan, and the United States — would do well to heed. In fact, EU
participants echoed these sentiments by blocking a statement at the Belt and
Road Summit on trade, on the grounds that it was not based on “transparency and
co-ownership”.

Does India have a lot to lose from boycotting OBOR? Not
necessarily. China’s investment into India has risen considerably since 2014.
According to Indian government figures, $800 million in Chinese foreign direct
investment (FDI) came into India in just 17 months between April 2014 and
September 2015, more than double all previous Chinese FDI to India. This is on
a similar scale to estimates of Chinese FDI into Pakistan under CPEC, and is
simply indicative of the immense push factor of excess Chinese capital. If it
can be invested in India in a manner that meets New Delhi’s stated criteria, it
would naturally be mutually beneficial. However, drawing lines upon a map in a
unilateral fashion, not just in India, but across Asia and the Indian Ocean
region, is a far more sinister matter.

One Belt, One Road will only be a success if it is
pursued in a more transparent, status quo-oriented, market-driven and
responsible manner. That would be welcome. India has staked out a clear
position. Others may arrive at the same conclusions the hard way.